As of 10:55 a.m. ET, the Dow Jones Industrial Average rose 12.9 points, or 0.1%, to 13184, the S&P 500 was down 1.7 points, or 0.12%, to 1418 and the Nasdaq Composite fell 9.8 points, or 0.33%, to 2982.

The technology sector lagged behind the broader markets as Apple (NASDAQ:AAPL) shares took a hit. UBS cut its outlook on the company to $700 a share from $780. Jefferies also said "Apple component suppliers have received order cuts in the last 24-48 hours, but we believe assembly orders remain unchanged." Apple is the largest publicly-traded company in the U.S. and often has an outsize affect on the markets.

Energy giant Schlumberger (SLB) came under pressure after it warned that contractual delays and slumping land activity in North America will weigh on its fourth-quarter earnings. Best Buy (BBY) also skidded lower after saying founder Richard Schulze will have until after the holiday season to make a takeover offer.

Factory activity in China rose to the highest level in 14 months in December, according to HSBC's Flash Purchasing Manager's Index. The PMI gauge climbed to 50.9 from 50.5 in November -- indicating the sector expanded at a quicker pace. Economists said the data suggest the world's second-biggest economy is probably regaining its footing, helping to alleviate fears it was headed for a so-called hard landing.

"China's ongoing growth recovery is gaining momentum mainly driven by domestic demand conditions," Hongbin Qu, HSBC's chief economist for China, wrote in the report. "However, the drop of new export orders and the downside surprise of November exports growth suggest the persisting external headwinds."

Meanwhile, the private sector in the eurozone continued shrinking, but at a slightly slower pace in December from November. The Markit Flash Composite PMI checked in at 47.3 -- a nine-month high -- from 46.5 in November.

"The eurozone downturn showed further signs of easing in December, adding to hopes that the outlook for next year is brightening," Markit Chief Economist Chris Williamson wrote in the report. He said there is an "increasing possibility" of a return to growth in the 17-member currency bloc in the first half of 2013.

Germany, Europe's biggest economy, saw its private sector expand for the first time in eight months, according to a separate report from Markit. Still, its manufacturing pulled back, highlighting the ongoing struggles there.

On the U.S. front, U.S. factory output jumped 1.1% in November from October, much more than the 0.3% expected. However, the Federal Reserve said much of the gain was payback for losses incurred in October due to Hurricane Sandy.

The Labor Department said inflation at the consumer level fell 0.3% in November from October, a slightly steeper drop than the 0.2% expected and the first decline since May. Excluding the food and energy components, prices were up 0.1%, slightly less than the 0.2% expected.

Traders were also paying close attention to talks in Washington, D.C aimed at averting the looming fiscal cliff. President Barack Obama and Speaker of the House of Representatives John Boehner met at the White House late Thursday for a "frank" discussion. It remained unclear how close the two leaders were to striking a deal.